Buying Versus
Leasing
When you
lease a vehicle, you are basically renting the car on a long term,
month to month basis, at the end of the lease you either turn the
car in or buy it at a pre-determined cost or residual value.
There are two kinds
of Leases
1. First; there is a closed end lease which means that at the end of
the lease you turn the car in.
2. Second; there is an open end lease which gives you the option of
either buying the car at a pre-determined residual value or turning
the car in if the car is not worth the residual value, however you
are liable for the difference up to 3 monthly payments.
The biggest advantage of leasing for most people is that you pay
less in the beginning than if you purchase. However in the long run,
you might pay as much as 25 to 40% more unless you use the car for
50% business which can be written off under current tax laws.
If you do lease, make sure you know the sale price or the
"capitalized cost" of the car. This is important because most of the
time the leased amount is not disclosed and can be "capped" at a
price far above the MSRP (sticker price). And remember all leases
have a mileage limit, if you drive beyond the mileage limit there
are substantial penalties as high as 15 cents per mile.
Check the following
Points Carefully Before you Lease:
● What is the cost of early termination?
● What are the late payment penalties?
● What are the standards on measuring wear and tear of the
car?
● What is the yearly mileage limit or cap and what is the
cost per mile if you go over
● Make sure you know the total obligation and the exact
monthly payment
● Never pay extra money down to get a lower lease rate
A dealer can make more money leasing than on selling because the
total selling price of the vehicle is usually not disclosed in a
lease, and the complexity of the lease can give the seller other
ways to make profit that you are not aware of.
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Buying Versus Leasing -
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Auto Loan Glossary
- Terms and definitions
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auto loan financing.
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